US bond prices rise before Fed meeting next week

U.S. Treasury debt prices rose on Friday with benchmark yields hovering near three-month lows, as investors shifted their focus to the Federal Reserve meeting next week, where it might signal it will stick to the current size of its bond-purchase stimulus.

The bond market has traded in a tight range since Tuesday when yields fell on data that showed employers hired fewer workers than expected in September, stoking fears the economy was slowing even before the government's 16-day shutdown that ended last week.

The 10-year note yield was on track to fall for a second straight week, though it has struggled to decline much below the chart resistance of 2.50 percent.

"We are moving sideways. The market is expecting Fed's bond purchases will continue into 2014. There's nothing in the near term that will change this view," said Brian Rehling, chief fixed income strategist at Wells Fargo Advisors in St. Louis.

The government is catching up on issuing a backlog of data, which have largely supported the notion the U.S. central bank needs to stick to its current level of bond-purchase stimulus, or QE3, to support an economic recovery that has slowed since late summer.

Economists expect Fed policymakers will decide to maintain their $85 billion monthly purchases of Treasuries and mortgage-backed securities when they meet next Tuesday and Wednesday. They projected the Fed would keep this pace of buying until March.

"The market continues to do better here in an environment where the Fed is not tapering quantitative easing until sometime in 2014," said Gary Pollack, head of fixed income trading at Deutsche Bank Private Wealth Management in New York.

Benchmark 10-year notes were last up 4/32 in price to yield 2.507 percent, down 1 basis points from late on Thursday and 8 basis points from a week earlier.

The 10-year yield has fallen from 3 percent on Sept. 5, about two weeks before the Fed surprised investors by leaving its bond purchase program unchanged.